DEPARTMENT OF JUSTICE FILES SUITS ACROSS THE COUNTRY
IN CRACKDOWN ON SO-CALLED "TRUST" SCHEMES

"Trust" Schemes Nationwide Cost Treasury Nearly $3 Billion Annually

WASHINGTON, D.C. - The Department of Justice announced today that it
has filed lawsuits in San Diego, Boston, and Cincinnati as part of a campaign
to stop the spread of phony trust schemes which the government contends are
being used illegally to evade the payment of taxes. The lawsuits are the
latest installments in a government crackdown on the promoters of bogus tax
scams.

"Today's technology has made marketing tax fraud schemes incredibly easy,"
said Eileen J. O'Connor, Assistant Attorney General in charge of the
Department's Tax Division. "With the filing of these suits, the Tax Division
takes another step in its efforts to stop the proliferation of bogus "trusts"
and other tax cheating schemes. While the promoters of these schemes say they
lead to tax savings, they can lead instead to substantial penalties, including
a prison sentence."

In one of the cases filed today, the government alleged that a promoter
charged customers several thousand dollars each to set up trusts and transfer
the customers' property into the trusts. The complaint alleges that the trusts
were then used to illegally claim tax deductions for personal expenses such as
utility payments, gardening expenses, and home maintenance costs, and to avoid
reporting and paying tax on income.

In the complaint filed in San Diego, the Justice Department alleges that
Roderick Prescott, of Solana Beach, California, through businesses named
"Trust Educational Services" and "National Trust Services," sold hundreds of
sham trust schemes. Prescott and his businesses sold trust packages for as
much as $15,500. The complaint also alleges that Prescott's activities have
cost the Treasury more than $135 million so far.

In the Boston case, the government alleges that Kevin Mahoney of Attleboro,
Massachusetts, promotes sham trust schemes through businesses named "the
Citadel Group," "Cornerstone Financial Group," the "National Association of
Certified Estate Planning Attorneys," and "the Liberty Network." The complaint
alleges that Mahoney sold his trust materials for more than $3,500. The
government filed a similar suit in federal court in Chicago last month against
two alleged operators of the same schemeŚMichael D. Richmond and Rex E. Black.

In the suit filed in Cincinnati, the government alleges that Robert Welti, an
accountant in Ripley, Ohio, prepared tax returns for clients across the
country that claimed improper tax deductions or failed to report income which
resulted in estimated tax losses of over $3 million per year. According to the
complaint, Welti charged his clients $2,400 to prepare tax returns based on
the bogus trust schemes. The complaint states that although Welti's clients
come from 20 different states, they all rely on trusts to evade taxes that use
the same address in Belize, a "tax haven" country.

Last year, 45 people were convicted for tax evasion because of their
participation in phony trusts. Defendants who were sentenced to prison faced
sentences averaging more than five years. As of December 31, 2001, the IRS had
160 open criminal investigations involving trust schemes.

If someone claims that a trust will lead to lower taxes, here are some
warning signs that the scheme could instead lead to prison:

deductions for personal expenses paid by the trust.

depreciation deductions for a personal residence.

high fees for trust packages, to be made up by promised tax benefits.

lack of an independent trustee.

use of terms like "pure trust," "constitutional trust," "sovereign trust,"
"unincorporated business organization," or "common law trust."

IRS Commissioner Charles Rossotti said "Promoters can entice taxpayers into
abusive trust schemes by making promises that are too good to be true. Getting
involved in such schemes can be a costly mistake for taxpayers. Before
entering into any arrangements, make sure you consult with a reputable,
trusted tax professional for advice. Taxpayers who want to report possible
schemes can call the IRS at 1-800-829-0433." The IRS estimates that abusive
trust schemes cost the public about $3 billion every year.